Problem: Consider the following income statement for WatchoverU Savings Inc. (in millions):
Assets
|
|
Liabilities
|
|
Floating-rate (currently 10% annually
|
$50
|
NOW accounts (currently 6% annually)
|
$70
|
30-year fixed-rate loans (currently 7% annually)
|
50
|
Time deposits (currently 6% annually)
|
20
|
|
|
Equity
|
10
|
Total
|
$100
|
|
$100
|
Q1. What is WatchoverU's expected net interest income at year-end?
Q2. What will be the net interest income at year-end if interest rates rise by 2 percent?